ARTICLE · 23 DECEMBER 2008

The Impact Of The Credit Crunch On Facility Documents

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The continuing global credit market tumult has caused financiers to reassess the terms on which they are prepared to provide finance. This reassessment has had a significant impact on the terms and conditions of finance documents.

AustraliaStrategy

The continuing global credit market tumult has caused financiers to reassess the terms on which they are prepared to provide finance. This reassessment has had a significant impact on the terms and conditions of finance documents. Some of these changes include the following:

As a general rule, the balance of negotiating power has tipped in favour of the lender and, within the banks, away from the relationship managers / deal originators in favour of the bank's credit departments.

Lenders are seeking tighter financial and general covenants and more security (the days of 30% headroom on the financial covenants and a 70% group guarantee and security coverage are now gone for most deals). Whatever 'covenant lite' deals were prevalent in the market before the current market turmoil have disappeared.

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